The following post was published in the December 2015 issue of Australian Broker.
I have been very lucky. My parents gave me a good education and I was able to attend university after which I took the obligatory gap year travelling around Europe and the USA, before returning home to start my working life. I treasure these experiences and seeing the world at a relatively young age helped shape my perspective on life. Since then I have been able to work in the Europe, USA and Asia. As you get older and look around you recognise your good fortune and there is a strong feeling of the need to give back. I’m not the first person, nor will I be the last to think and say this.
Over the last 2 years I have attended a number of different financial services conferences in the USA. I attended the Financial Brand Forum and this provided an interesting insight into financial services marketing trends in the USA. As we frequently hear social media and integrated multi-channel approach is the future, or should I say it’s happening now. I attended the Emerge: The Forum on Consumer Financial Services Innovation. This forum focusses on the under-banked market and the innovations that are occurring, particularly around cheque cashing and remittances. In Australia, because of electronic banking (US still relies heavily on cheques) there is a limited remittance market which has been dominated by Asians sending money back to their home country; however in recent times non-bank players have been driven out because of the difficulties in complying with the Anti-Money Laundering & Counter Terrorism Financing (AML&CTF) Act.
One of the most interesting statistics from these conferences is that the underbanked segment of the market is growing as the lower middle class is becoming the new poor. Why? Real wages in the USA have not grown since 1975. The other statistic I now like to quote is that 60% of Americans are accumulating debt faster than savings. This is obviously unsustainable and it’s no coincidence that the Federal Reserve has the largest balance sheet in the world because of Quantitative Easing (QE).
I have attended the Mortgage Bankers’ Association (which I’m a member of) conferences in Las Vegas and San Diego and Secondary Mortgage Market conferences which have provided some valuable insights. Importantly, for investors there is a move to a single fungible mortgage security, the aim being to remove the differences between Freddie and Fannie paper.
These conferences are at good quality hotels, most are brand names. Travel provides the opportunity to think and observe and something that really shocked me was the age of many of the employees working at these conferences, airports, car hirer companies, etc. Many were much older than 65 and because of the lack of social welfare net are working as they cannot afford not to. It’s embarrassing to have a porter who should be at home or out enjoying their twilight years wanting to carry your bags, or at the conference lunches and dinners these same senior citizens struggling to serve and collect the meals.
On a flight from Chicago to SF I sat beside an executive from Tesla who told me that they had just hired 100 car engineers from South Australia. Our best and brightest lost to a new and exciting world.
These trips and observations have made me think about the future for the average Australian. There is pressure to lower the cost of production that can only occur through either wage reduction or improvements from capital inputs, or a combination of both. This is reflected in the trend away from full time to casual or part–time work and the debate on penalty rates. The importance of protecting and commercialising the intellectual property of our entrepreneurs is critical and how far Australia is behind many countries in this area. The decline in our manufacturing base and the growth in services industry overlaid with increasing life expectancy, changes brought about by offshoring and the massive changes created by the internet. At the same time we are legislating and imposing ever increasing compliance that comes at a cost while raising the barriers to entry for new players.
Our fall in tax receipts when considered at an individual level is actually a fall in real household incomes and coupled with insufficient superannuation savings, students struggling to find work and pay off their HECS reveals all areas of society are under enormous pressure. We are going through 25 years of re-structuring and there is no easy answer.
The world is changing rapidly and it is forcing change on us, so it is important it is embraced as competition is healthy, if on a level playing field; however we are at risk of losing our mantle of being an egalitarian society. We must consider the positive and negatives impacts of all this change, so our middle class do not become the new poor, as is happening in the US.
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